“I was born in a poor village in the North-Eastern [part] of Thailand. When I was a kid, everything is fun and easy. When the TV came, many people came to the village, they said “you are poor.” You need to follow success for you life. You need to go to Bangkok to pursue success in your life. So I feel bad. I feel poor. So I need to go to Bangkok. When I went to Bangkok, it’s not very fun.” – Jon Jandai.
I think I know why we make trading so hard. I’ll leave the “life” part of the discussion to Jon Jandai, a little later.
We make trading hard because deep down, we believe that it must be hard to make money. We believe we need to be smarter, faster, braver, bolder, calmer, better-at-analysis, more informed or just lucky to get ahead. Without a combination of these things, we believe we won’t make it as traders.
We’ve all been raised with the idea that “hard work pays off”, and I’m not going to challenge this adage. What I am going to do is challenge how we bend, squeeze, contort and manipulate this idea of “hard work” into the profession of trading – because most traders are doing it wrong and their lack of success is evidence enough. “Hard work” is the square peg into the round hole of trading.
For most traders who diligently want to apply the “hard work” rule to trading (noble enough) the end result is usually a very complicated approach to the market. Typically, the trader’s charts end up looking a little like this:
Yes, I cherry-picked a particularly bad one. But stay with me for a minute. I am not saying that this trader, who uses a complicated approach to the market is wrong. In fact, let’s assume that this trader is profitable.
When other traders (or aspiring traders) ask this person what the key to his or her success is, the answer will probably be something like “a deep understanding of the markets through proprietary technical and fundamental analytical tools, which give me pin-point entries with precise timing” The simple English translation is: “I make money because I have a very complicated system developed with hard cash, and hard work. Look, I’ll show you enough to confuse you. Yes, it will be impossible for you to figure out what I am doing and copy me.”
The aspiring trader now believes he has has an idea of what “hard work” practically translates into in trading.
I think this is mostly a waste of time and mental effort.
I think trading systems don’t need to be complicated at all. I think the energy that we so badly want to dedicate to “hard work” is better spent analyzing ourselves, and not the market. We’ll come back to this.
Just yesterday, I ran I live webinar were I showed off a trading system based on the flip of a coin. If the coin landed on heads, we went long. If the coin landed on tails, we went short. We had a standard stop-loss and profit target in mind and did no trade management whatsoever.
Here you can see me flipping my digital coin four times, and taking four trades:
In the webinar, we took 99 trades. And guess what, we made money. If you missed it yesterday, you can catch the recording here.
So if a system as simple as flipping a coin can be profitable – and you are not profitable – you have to ask yourself, why? Do you need to apply some “hard work”. Yes!
Does this hard work need to be applied to create or master a complicated trading system? No!
You need to direct your “hard work” inwards. Analyze yourself, not markets.
Imagine these indicators bolted on to your charts:
MF-RSI: The Mental Fatigue RSI which asks if you are trading from an alert and calm state and checks if you are over-stressed or approaching exhaustion.
MAXD: Have you hit a maximum weekly drawdown, which, when hit, forces you to stop trading? (Apologies to the MACD)
MFE: Mean Favourable Event which checks to see if you have you hit your weekly target and also forces you to stop.
CCI: The Chart Checking Indicator which measures whether you are dropping to lower timeframes or watching each and every tick as it unfolds.
Obviously these indicators don’t exist. (If they do soon, under slightly different names, you saw them here first). The point is that directing your analysis and “hard work” inwards will produce the results you are looking for. Work on the trader, not the system. Watch the coin flip webinar and see how little the system matters.
Trading is easy. My Flow system is about as simple as it gets. We go long when we see buyers enter the market. We short when sellers take over. We focus our analysis on ourselves, not complicated entry methods. We find a fit between personality and trading style and availability to make it easy. If you’ve been a reader for awhile and never taken the leap (or perhaps you’ve reached out but got cold feet), I want to encourage you to get in touch with me and join our trading group. You’ll be in the company of a global group of traders who make easy, profitable trading decisions everyday.
I’ll leave you with a very interesting TEDx by Jon Jandai. Instead of spending 30 years paying off a bond on a house, Jon just went ahead and built his in a month or two, because that’s the path he chose. He works two hours a day. He believes life is easy. I think Jon’s message applies doubly to traders.